Dynamic Funds Portfolio Manager Comments on Russia - Ukraine Tensions

While we always hope that cooler heads will prevail, unfortunately, a serious conflict has begun. We hope that as the days progress, all parties involved will seek diplomatic solutions to their concerns. The market has responded to the news of the situation in Ukraine by widening credit spreads, and we have generally seen more risk aversion within the markets. When we saw a deterioration in credit markets we acted as we always do. We were emotionless and we reduced risk over the course of the last several weeks.
We're still of the view that the economy has a good outlook and that we can avoid a recession. The yield curve is still upward sloping. The year-over-year change in the price of gasoline, as measured by NYMEX gasoline futures is still under 100%. Four out of the last five recessions were predicted by an over 100% change year over year in NYMEX gasoline futures. Five out of the last five recessions were predicted by an inverted yield curve. The inverted yield curve can also have false positives, and in fact, it has had two false positives. Some people use the expression that it has predicted seven out of the last five recessions.

Jennifer Stevenson : Oil and Brent Crude Effects: Energy Update - Russia-Ukraine Conflict - Full Commentary

Brent (International, North Sea) oil prices are over $101 and US WTI is over $95 with news late last night and into this morning that Russia has launched a full scale invasion across three fronts into Ukraine. At this point, we do not have disruption of physical energy flows (oil, natural gas and electricity) but that remains a risk. Energy stocks are mixed as macro market risk aversion weighs on what are high sales prices for oil and natural gas.
We entered this current geopolitical situation with high oil prices due to tight physical oil markets, and strong EU gas prices after price spikes caused by lack of supply during the coldest part of the winter. Now, we are in the midst of a Russian invasion of Ukraine where Russia is a meaningful supplier of oil and natural gas to the world and the Ukraine is an important gas pipeline transit point.

When we feel a loss of control, our natural tendency is to seek safety. Take shelter from the storm. This is what can make investing frustrating. We have no control over the events that cause volatility, which often leads to poor decisions.
Today, the market is dealing with major uncertainty on two fronts. No one knows how the unfolding tragedy in Europe will conclude. And there is no clear consensus on how aggressive central banks will be in their efforts to tame inflation.
What is known today is that cash delivers negative inflation adjusted returns. And the best businesses are likely to continue delivering free cash flows and growth. For long-term investors, the prime time to buy those businesses is usually when sellers are anxious about events they can’t control.

Marc-Andre Gaudreau : Credit Markets and Spreads Comments

We anticipate that the Russia/Ukraine conflict should have a negligible direct impact on the North American economy in the near term. However, this could push/keep inflation pressures at higher levels given increased energy prices
We have seen both investment grade and high yield spreads widened year to date from historical tights and we see opportunities in high-quality credits
As such, we started to increase our exposure to CAD and US senior bank bonds which are trading almost at the wides of 2018 and 2016. In addition, we also increased our allocation to high-quality BBs which we believe should perform well in either scenario (continued economic growth or a mild recession). Portfolio liquidity remains high as we continue to nimble at opportunities in this environment

Chief Investment Strategist: Myles Zyblock on U.S. Sanctions: Myles Zyblock Market Commentary February 24 2022 (Part 2)

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